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Monday, March 16, 2009

Zoellick promises World Bank support to Africa to cushion downturn’s effects

The World Bank will provide rapid and flexible help to African countries being buffeted by the shock waves off the global recession, World Bank president Robert Zoellick has assured the continent's leaders.

"The financial crisis that grew into an economic crisis is now becoming an employment crisis, and in the coming months, for some, it will be a human crisis .... Far from being insulated from these events, developing countries are feeling the effects - and Africa is no exception," he warned in his speech to the twelvth ordinary session of the Assembly of the African Union, in Addis Ababa.

The first effects will be noticed in those sectors of the African economy that are most integrated with the world economy.

African exports in 2008 are expected to be 2% lower than those of 2007, with some countries faring much worse - Angolan exports dropped 30% last year.

The overall growth rate for sub-Saharan Africa in 2008 was 5,4%, a drop of about 1,4% in relation to 2007, and it is likely to decline further this year.

Remittances sent back to the continent from Africans living and working abroad are shrinking fast.

Kenya saw the growth rate in remittances it receives cut by 50% in 2008, and it expects a zero-remittance growth rate this year.

Foreign direct investment flows into all developing countries fell from 2,1% of gross domestic product (GDP) in 2007 to 1,5% last year, with the decline especially severe in Africa.

The World Bank also expects a fall in tourism this year, which will hit some African countries particularly hard.

The Seychelles, for example, relies on tourism for 2% of its GDP, some 30% of its employment, and more than 70% of its earnings in hard currency.

And foreign aid flows to Africa will probably stagnate this year.

"The World Bank group wants to partner with you and African regional organisations to address these critical challenges," assured Zoellick. "We are committed - and I am committed personally - to working with you so that Africa can best cushion the downswing."

Thus, the group is increasing its International Bank for Reconstruction and Development (IBRD) lending to developing countries by $100-billion over three years.

The bank is also going to triple its lending this year, to some $35-billion.

For example, it is preparing a $2-billion IBRD loan for South Africa to support the reform of the country's power sector.

In addition, World Bank affiliate International Development Association (IDA) is to fast-track $42-billion in no-interest loans and grants.

So, the Democratic Republic of Congo is to get an accelerated $100-million IDA loan for infrastructure maintenance and to pay teachers' salaries, and plans are in preparation to rapidly increase financial support to the Comoros, Ghana, Kenya and Zambia.

Further, the World Bank's private-sector arm, the International Finance Corporation (IFC), has created an infrastructure crisis facility, and $300-million of this is being made available to supply top-up financing for viable privately funded infrastructure projects in Africa that may be in financial difficulties owing to the international crisis.

The IFC is also ready, willing, and able to help recapitalise banks in poor countries, to finance trade, and to provide refocused advisory services.

IFC private-sector investments will probably come to some $30-billion over the next three years.